In this day and age, health insurance is something that we all need to have but have different ways of getting it. Health insurance is expensive. If you work for a company that offers insurance, you wonât have to worry about deducting it from your taxes, but if you have been paying out-of-pocket for your health insurance and living on a self-employed income, you might be able to deduct the total dollar amount from your taxes. There are specific criteria you will have to meet in order to be able to make this deduction. In this article, we will discuss what the self-employed health insurance is and how you can deduct your monthly health insurance premiums.
Because it doesnât require itemizing, the self-employed health insurance deduction is considered an âabove the lineâ deduction. If you are able to claim it, doing so lowers your adjusted gross income (AGI).
This tax deduction gives self-employed people an opportunity to deduct the following medical expenses:
One benefit of this tax deduction is that itâs not only useful for your own health insurance expenses. If you are paying for health insurance for dependents, children or your spouse, you may also deduct these premiums at the end of the tax year.
If you are self-employed such as a freelancer or an independent contractor, you can deduct any health insurance premiums that you paid for yourself, your dependents, and your spouse. If you are a farmer, you would report your income on Schedule F and if you are another kind of sole proprietor, you would report on Schedule C. You may also be able to take this deduction if you are an active member of an LLC that is treated as a partnership, as long as you are taking in self-employed income. This same rule of thumb goes for those who are employed by S-corporations and own 2% or more of the companyâs stock. Self-employed people who also pay supplemental Medicare premiums, such as those for Part B coverage can also deduct these.
You wonât be able to take the deduction if:
One of the major differences between the health insurance tax deduction and other tax deductions for self-employed people is that itâs not taken on a business return or a Schedule C. It is considered an income adjustment, in which case, you must claim it on Schedule 1 that is attached to your Form 1040 federal income tax return.
Self-employed people, such as freelancers, independent contractors and small-business owners, might have the opportunity to deduct their health insurance premiums from their taxes. As long as your business made a profit for the previous tax year and you were not eligible for a group health insurance plan, you should be able to take this deduction. If youâre not sure whether or not you meet the criteria, you may seek advice from a tax professional. You will need to fill out all of the necessary forms to qualify for a deduction. To make this process as seamless as possible, itâs important to keep track of all your business records.
Deducting Health Insurance Premiums When Youâre Self-Employed is a post from Pocket Your Dollars.